Policy Watch: Trade Adjustment Assistance

The Trade Adjustment Assistance Reform Act of 2002 profoundly changed the nature and scope of U.S. policy for addressing dislocations of workers caused by trade. First, the legislation will potentially double the number of TAA recipients and more than triple the total cost of the program to almost $2 billion annually, making it a much more important component of the patchwork of programs serving the unemployed (Congressional Budget Office, 2002). Second, it introduces new elements such as wage insurance and health credits into a program that had previously included primarily only training and cash benefits. The addition of these benefits creates both the opportunity for gains from greater coordination and the potential for costly distortions and serves as a testing ground for the broader use of such provisions. Although the program still covers only a small (and peculiarly